Save the Derby Railways .. an alternative to cuts?

Defend Derby Bombardier Jobs!

March from Bass Recreation Ground (off St Alkmund’s Way A601) 10am July 23rd to a rally at The Silk Mill.

As you probably know, the government has awarded the £1.4 billion contract for Thameslink rolling stock to Siemens in Germany rather than to Bombardier (the privatised British Rail engineering).

1400 jobs in Derby are planned to go – with a “knock on” effect on 13000 more jobs in the Midlands.
The four main unions involved have called for a national demonstration in Derby on Saturday 23rd July

We can and will win this one – given speedy organisation and determination!

This event isn’t in Birmingham, and I don’t often mention things outside of Birmingham but apart from the desire to express solidarity with people losing their jobs in and around Derby, it serves to illustrate some of the things that I have an will be talking about in the alternatives to cuts series.

That is the relationship between investment, jobs and growth and what that relationship means to the economy and importantly to the deficit and debt.

There’s an interesting blog post on this relationship (albeit focused on the USA for it’s data, but the theory holds in the UK as well, and I’d expect to see similar shaped graphs over here.  It does get a bit technical later on but stick with it).  Billy Mitchell is Research Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW Australia.

It is clear that a solution to unemployment is to stimulate private spending. The problem is that the neo-liberal period has pushed so much debt onto the private sector that the balance sheet adjustments necessary to reduce the debt exposure will take time. Holding out for a sudden reversal of the investment ratio is poor policy and just forces unemployment to remain higher for longer.

The correct thing to do – despite what Paul Ryan thinks – is for the government to expand its share of total spending even further and drive aggregate demand harder at present. It should start by introducing a Job Guarantee and spending on public infrastructure. There is no secret – unemployment is caused by a failure of aggregate demand.

When one or more components fail (private spending) then public spending has to fill the gap. I am sorry it is so simple.

Unfortunately in Derby we see the reverse of this happening.  This is not strictly a cut, as far as I understand it, because it is a new contract, but it has the same effect as a cut – job losses – and runs directly against one of the alternatives to the cuts – policies to produce economic growth (I’m clearly going to have to write that post soon because this is the second time I’ve needed to link to it!).

This government could have decided that investing in manufacturing in the UK provided the best value for money for taxpayers, but they chose to take the cheapest option instead, an option that is going to cost Derby hugely – and in Birmingham we know what it is like to lose a large manufacturer.  This decision shows how far removed the ConDems are from the ideas that surround policies for economic growth – policies that would themselves produce a situation which reduce the deficit and the debt.

If the government had chosen to invest in UK manufacturing we would see people in jobs, paying taxes, earning and spending money and being productive.  Instead we see people signing-on, hoping to find a new job at an economically uncertain time (although jobless totals fell last month (link to pdf)).  This will cost the government, not just through the lost taxes both from the workers and the company, but also in increased welfare & benefit payments.  And you can see the initial knock on effect from 1,400 job losses – an expected 13,000 jobs affected.  Any of those jobs lost will also have a knock on effect (albeit much smaller).  Job losses cause job losses, and as an economic climate becomes more uncertain, private companies become less willing to take risks (especially when it’s hard to borrow money).  If private companies do not take risks to expand their business, then they will not make up for the jobs being lost in the public sector.

What needs to happen is that the public sector needs to step in, the government can borrow money (despite what you hear from right wingers – I’ll explore that in another post to come in the alternatives series), and it can borrow money more cheaply than the private sector.  By investing in manufacturing and infrastructure, the government can tackle many issues at once – creating jobs and growth; supporting the UK manufacturing industry and by investing in “green manufacturing” we can help to work on the much longer term problems of our energy requirements and climate change.

Unfortunately such joined up thinking does not seem to come from this government.  So if you can go along to Derby to support their workers then do so, not just because you want to show your solidarity, but also because investing in the manufacturing sector is exactly the kind of thing this government should be doing as part of its economic policy set, but isn’t, and that failure is likely to put us into a double-dip recession.

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